Galaxy Digital has launched a swap dealer desk enabling institutional clients to trade event-driven contracts bilaterally, sidestepping public prediction exchanges. The firm executed a $10 million OTC event swap with crypto hedge fund Arca tied to passage of major U.S. crypto legislation, nearly five times larger than the comparable Kalshi-listed contract. The move addresses structural problems facing institutional traders despite Kalshi’s volume surging to $178 billion annualized. Large funds cannot access meaningful exposure without moving thin order books on platforms like Kalshi and Polymarket. OTC execution offers three advantages: deeper liquidity through dealer risk warehousing, privacy absent on blockchain-based platforms where wallet addresses reveal positioning, and compatibility with existing ISDA Master Agreement frameworks that reduce operational and regulatory friction. Arca CIO Jeff Dorman confirmed prediction markets lack sufficient institutional liquidity for larger funds. Galaxy’s desk joins broader intermediary positioning as Wintermute provides liquidity on public platforms and Marex packages outcomes into structured notes.
FXnCO Insight
Institutional event trading is migrating to bilateral OTC structures where scale, confidentiality, and regulatory compatibility outweigh the transparency of public prediction exchanges.
Source: Finance Magnates